Commercial Real Estate Expected to Bounce Back in the Coming Year

According to Crain’s News in Real Estate, we can expect a bounce back this coming year in the commercial real estate.

Commercial Real Estate Expected to Bounce Back in the Coming Year

Falling from peaks in 2014 and 2015, commercial sales transactions and prices are showing signs of reviving after a “quintessential correction”

No segment of the real estate market fell harder this year than commercial sales, a category that includes offices, multifamily residential rental buildings, land and hotel deals.

Commercial developer Cushman & Wakefield projects about $32.5 billion of sales across the city by the end of the year, a nearly 44% drop from the $57.8 billion of transactions it recorded for 2016.

The anemic sales have the industry wondering whether the market will rebound next year.

“We have been in the midst of a quintessential correction,” said Bob Knakal, chairman of New York investment sales at Cushman, who noted that the number of yearly commercial sales transactions in Manhattan has dropped 45% from a peak in 2014, and dollar volume has fallen 70% from a record year in 2015. “What happened is downward pressure got exerted on value and bids came in lower than sellers wanted to accept, and so the number of transactions declined.”

According to Cushman’s data, this year land prices have fallen 17%, the value of retail space is down 8%, office space has declined 4%, elevator apartment buildings fell 3%, and walk-up buildings dropped 1%. But Knakal said he believes transaction volume will pick up, which bodes well because when transactions accelerate, prices generally inch back up. Cushman has not yet compiled fourth-quarter data on the number of sales, but Knakal said he has noticed that activity “has been tremendous.”

“For the past two months it was fun to be a sales broker again,” Knakal said. “All of this recent activity is positive for 2018.”